TABLE OF CONTENTS INTRODUCTION ............................. 1 The Purpose of a TDR Program ................. 1 How TDR Programs Work .................... 1 BUILDING A SUCCESSFUL TDR PROGRAM ........ 3 Mandatory versus Optional Programs ............. 4 The Takings Issue .......................... 8 CASE STUDIES .............................. 11 Montgomery County (Maryland) ................ 11 Pinelands (New Jersey) ...................... 15 Calvert County (Maryland) ................... 19 San Luis Obispo County (California) ............. 23 Thurston County (Washington) ................ 29 Collier County (Florida) ..................... 31 The Etowah Initiative/Summer 1998 1 INTRODUCTION In 1998 the state of Georgia passed enabling legislation which autho- rizes local jurisdictions to implement transferable development rights (TDR) programs in their communities. This report offers an introduc- tion to transferable development rights and presents a series of case studies of TDR programs around the United States. These experiences should be helpful to local governments in Georgia that are considering creating their own TDR programs. The Purpose of a Transferable Development Rights (TDR) Program The concept of transferable development rights (TDRs) is a recent innovation in land use control that allows communities to: N preserve ecologically sensitive lands and historic landmarks, N preserve important agricultural and forested areas, N stimulate economic growth, N manage urban development by targeting growth to desirable areas, and N revitalize downtown districts by attracting new businesses and industries. How TDR Programs Work Under a TDR program, the development rights from a naturally or historically significant parcel of land are separated from the land and are sold for use on another tract. TDR programs channel development away from sensitive areas and into areas where such growth is sustainable and desirable. TDR programs allow communities to regulate land use and pro- tect valuable resources while compensating landowners for the loss of de- velopment potential. TDR programs work through the free market at a significantly lower cost to taxpayers than many other regulatory systems. TDR programs require the establishment of two designated regions: the sending area and the receiving area. Sending areas are sites in which development is limited, while receiving areas are sites where increased development is encouraged. Property owners in the sending site can volun- tarily give up the right to develop their land and receive TDR credits in return. These credits can be freely sold or traded to anyone; the price for The Etowah Initiative/Summer 1998 1 this transaction is left up to the participants costs. The county has instituted zoning and and the free market, just as if the land itself developed a comprehensive plan with a were being sold. The sending site is then map that shows the desired future land use. placed under a conservation easement Using the future land use map as a guide, which is a legal agreement to restrict devel- the county designates the most valuable opment. When a property owner in the portions of the eastern half of the county as receiving area purchases the development TDR sending areas. Areas of the western rights, he is allowed to expand develop- half of the county that lie within desig- ment beyond current zoning limitations up nated growth centers, for example, new to a specified maximum. Typically, the towns and cities, are identified as TDR buyer is either a residential developer, who receiving areas. Growth is restricted in the can build houses on smaller lots with TDR sending areas, but the landowners may credits, or an industrial developer who can obtain compensation by selling TDR cred- increase the floor size of the work area on its to landowners in the receiving areas. the lot as dictated by the number of credits When these credits are applied to a parcel purchased. in the receiving area, the owner may de- In a successful program, the TDR cred- velop that parcel more densely, within its are worth more to the seller than the established limits, and increase profits. unused development potential on the land. This is essential if the TDR program is optional to encourage participation in the program. The system must also be economi- cally beneficial to the buyer, whose profit from the increased development must ex- ceed the cost of the TDR credits. An Example of a TDR Program The following example illustrates how a local government in Georgia can use transferable development rights to achieve land use goals: After several years of steady residential growth, a mostly rural county outside At- lanta decides it would like to manage fur- ther development to encourage balanced economic growth while preserving the natural and agricultural resources that make the area such a desirable place to live. Most of the remaining agricultural lands and natural areas are concentrated in the eastern half of the county. Most of the development is currently occurring in a haphazard, sprawl fashion along highways in the west, which is inconsistent with the county's goal of concentrating growth in designated centers to save on infrastructure 2 The Etowah Initiative/Summer 1998 BUILDING A SUCCESSFUL TDR PROGRAM This section offers a step-by-step dis- of and the use of TDRs. A sample ordi- cussion on how counties can create a trans- nance is included (Appendix 2). The ordi- ferable development rights program. nance should specify the public purposes of the program, such as preservation of agri- Legal Authority cultural lands or urban renewal. Multiple To avoid challenges, a local govern- purposes can and should be identified be- ment should have clear legal authority to cause it allows for flexibility in defining the develop and implement a TDR program. sending areas. These purposes should be Local governments can exercise only those consistent with local governments' man- powers that have been granted to them in date to conserve and promote the public express terms or are necessarily implied or health, safety and general welfare. absolutely essential to the declared goals of Local planning changes may also be state legislation. The force of this rule is necessary. These can include: significantly lessened in states such as N zoning and planning amendments, Georgia where the state Constitution pro- vides broad authority (known as home rule N establishment of TDR sending and powers) to municipalities and counties. receiving areas in local compre- Home rule powers are generally construed hensive plans, liberally and would seem to include the N creation of TDR overlay zones for power to implement TDR programs. How- receiving areas, ever, explicit authority to create TDR pro- N adjustments to zoning maps, grams was provided by the General N requirement of preliminary subdi- Assembly of Georgia through the passage of vision plans involving property in House Bill 1540, which was signed by Gov- receiving areas accepting TDR ernor Zell Miller on April 24, 1998. This credits, law (attached as Appendix 1) specifically authorizes local governments to develop N proper recordation of TDR trans- actions in land records, TDR programs and establishes guidelines for the program's operation. Programs es- N and the establishment of a coordi- tablished in accordance with this law nating body if the program is to should withstand legal challenges. Addi- serve more than one jurisdiction. tionally, courts have recognized that local governments have wide latitude to zone for Legal documentation that may be a neces- the public welfare. In so holding, the courts sary part of a TDR program includes but is have upheld innovative land use tech- not limited to: niques such as planned unit developments N a deed of transfer of development and cluster subdivisions even in states rights to purchaser, where no specific language in the state N a partial release applicable to any zoning enabling act authorized these inno- outstanding mortgage, vations. To meet the requirements of the TDR N and a conservation easement on enabling law and to ensure due process, a land from which TDR credits have local government should pass an ordinance been removed. outlining the process for the establishment The Etowah Initiative/Summer 1998 3 In sum, clear authorization to create a of TDR credits would be greater than the TDR program, combined with adequate value of the development potential of the planning, will head off legal challenges to land to encourage landowners to sell the program's implementation. their credits. An optional program does not ensure that development will be Mandatory versus Optional Programs restricted in the sending areas and the Any successful TDR program is the program must be carefully designed to product of intensive foresight and plan- garner sufficient participation from the ning. After the public purpose is estab- landowners. lished, it is necessary to determine whether In addition, the local government downzoning will be mandatory or optional. must decide whether increased develop- Under a mandatory TDR program, the ment in the receiving area can only oc- local government restricts the land use in cur through the TDR program, or the sending area beyond current zoning whether the local government will con- limitations. The landowner is then com- tinue to allow increased development pensated for the loss of development poten- through petition to the planning board tial with TDR credits that he may sell. or other means. If the only way to Ideally, the credits will be worth more than achieve denser development is through the development potential under the previ- the TDR program, it should ensure a ous zoning restrictions. A mandatory pro- demand for TDR credits. Moreover, man- gram ensures that development will be dated use of TDR credits for increased restricted in the sending areas. development does not require the addi- For example, current zoning in the tional effort and expense of persuading sending area may allow development of one developers to use TDR credits. Develop- dwelling unit per acre. Under the TDR ers with other options may choose more program, the sending area may be traditional and familiar methods, even if downzoned to allow development of one purchasing TDR credits would ultimately dwelling unit per five acres. An owner of a be more profitable. Although giving five-acre parcel would be given five devel- developers the option to increase density opment credits. He may use one credit to without using TDRs is less controversial, build a dwelling unit and sell the remaining it may undermine the effectiveness of the four, or he may sell all five credits and per- TDR program. Interestingly, most of the manently prohibit development on his five- TDR programs reviewed here have not acre tract. required developers to use TDR credits to Under an optional TDR program, the increase development in the receiving local government does not mandate areas. downzoning, but only designates the send- ing areas. Landowners in those sending Establishing the Receiving Area areas may continue to develop their prop- Determining the geographic bound- erty at the current zoning level, or they aries of the receiving area is often quite may sell their development credits and challenging. The receiving areas may be permanently restrict development on their defined parcel by parcel or much more land. Most optional programs allow the broadly; however, the designation of all landowner to sell the development credits receiving areas must be consistent with from a portion of his land. Ideally, the value the purposes of the program. 4 The Etowah Initiative/Summer 1998 When a TDR program is established to credit per acre. This is effective when all channel development into a specific area, land has roughly the same conservation for urban renewal for example, the choice value, as may be the case for some agricul- of receiving areas is obvious. More often, tural areas. Alternatively, a TDR program the choice of receiving areas is not obvious. could assign a higher number of credits for There are two principle types of receiving more sensitive or valuable lands. For ex- areas: industrial and residential. Finding the ample, forest might be valued at one credit appropriate area for residential develop- per acre while wetlands are valued at 1.5 ment largely involves determining which credits per acre. There is no inherent right area can best bear the hidden costs of infra- or wrong way to assign credits, but the structure. Increased residential develop- method will influence the supply and de- ment requires sufficient roads, schools, mand for the credits both from landowners sewer capacity, police protection, etc. In- (when downzoning is optional) and from creased industrial development puts a lesser developers. It can be a balancing act be- burden on an area's infrastructure but it tween fairness, effectiveness, and simplicity. must be accounted for nonetheless. Addi- Some TDR programs allow landowners tionally, the receiving and sending areas of sending properties to repurchase devel- should not be so far removed that the popu- opment rights at a later time. The option of lation in one region suffers a net loss in "buybacks" may help obtain participation economic development while the other is from some landowners, but it removes the burdened with excessive development. guarantee of permanent protection for However, to adequately preserve sensitive sending areas. areas, the sending and receiving areas must be separate. Balancing Supply and Demand of TDR Credits Establishing the Sending Area When establishing the sending and Selecting the sending area is often receiving areas, it is essential to balance the quite simple, since many TDR programs are supply and demand of TDR credits. The created for the protection of specific geo- demand from the receiving area will help graphic regions. It is important not to make determine the value of TDR credits. More- the sending area too large, or the market over, it will set a limit as to how many will be flooded with TDR credits for which credits could reasonably be placed on the there is no market. Programs with manda- market at one time. tory downzoning must be especially careful In establishing a TDR program, the to avoid a situation where the value of local government should try to avoid flood- TDR credits is far below the lost develop- ing the market with TDR credits, which ment value of the land. Note, however, that will result in the devaluing of TDRs. For downzoned sending areas pay reduced prop- example, a local government would not erty taxes to reflect the loss of development want to establish sending areas that would value. This can provide at least partial produce far more TDR credits than could compensation for the loss of development be used in the receiving areas. Moreover, potential. when an area is zoned for a particular use Land in the sending area must be as- there is, of course, a limited amount of signed a value in credits. In many programs, demand for that use. Under a TDR pro- this is a fixed per-acre value, such as one gram, a receiving area is zoned to allow The Etowah Initiative/Summer 1998 5 denser development of a particular type, for that level of development permitted with- example, denser industrial development. out TDR credits. The upper zoning tier But, if current zoning regulations satisfy the reflects the maximum development density demand for development in that area, there allowed with the purchase of TDR credits. may be no demand for TDR credits to pro- Generally, this upper tier should be the vide additional development. development density indicated in the fu- If downtown is zoned for industrial ture land use map created for the development and there is no demand for government's comprehensive plan. A local increased industrial development in that government may also choose to add an area, there will be no demand for TDR intermediate level that specifies the mini- credits. The value of TDR credits would mum increase in density with TDR credits. decrease, and landowners in the sending For example, an area has a base zoning area would not be fully compensated for the allowance of one dwelling unit per acre. By loss of their development potential. It is of purchasing TDR credits, a developer could critical importance to ensure that supply develop six dwelling units per acre, using and demand are well balanced when estab- one TDR credit for every dwelling unit lishing a TDR program or at least some of above the base allowance of one. To build the credits will be without value. six dwelling units, a developer would need to purchase five TDR credits. The local Development Potential of TDR credits government may specify that in order for In establishing a TDR program, deci- the TDR transaction to be worth while, the sions must be made as to the development developer must use TDR credits to build at potential attached to each TDR credit. For least four dwelling units per acre. There- example, one TDR may allow a developer fore, the developer would have the option to increase density by one dwelling unit per of using four, five, or six TDR credits on acre. If there are multiple receiving areas the acre. then it must be determined if credits will provide equal development increases for Valuation of TDR Credits each of these areas. It is easier if a develop- The valuation of TDR credits is left up ment credit allows the same amount of to the free market. Price is generally deter- density increase regardless of the tract on mined by the number of credits assigned which it is to be used, but it may result in per acre in the sending area, the number of uneven demand if one receiving area is acres in the sending area, the demand for substantially more attractive than others to increased development in the receiving developers. For example, to encourage area, and the amount of development in development in receiving area A, a TDR the receiving area that each credit permits. may allow an increase of two dwelling units If TDRs are not the only method of in- per acre, whereas in receiving area B, where creasing density in the receiving are, then demand for denser development is already the value of these credits will also be influ- high, one TDR may allow an increase of enced by developers' preference for TDRs only one dwelling unit per acre. versus other methods. The local government must also decide the upper limit of development density. Encouraging Participation This results in a two-tier zoning structure Education is critical to the success of for receiving areas. The base zoning level is TDR programs. The operation and function 6 The Etowah Initiative/Summer 1998 of TDR programs are not well known and city officials must work together to deter- may be intimidating to potential partici- mine the effect of a TDR program on prop- pants. This is particularly problematic in erty taxes, to determine other possible programs without mandatory participation. problems and solicit full community discus- Education is the first way to encourage sion, and to rally support for the program participation. The more a prospective par- before implementation. According to the ticipant knows the less time he or she APA, there are several major benefits to should have to invest in order to become developers: active in TDR exchanges. Realtors are N Decreased cost to produce subdi- important partners in TDR exchanges. vided lots They can aid in promoting TDR transac- tions to potential developers. N Increased profit per unit sold The American Planning Association N Increased certainty of planning (APA) recommends that, initially, the and zoning approval, or faster planning department engages in extensive approval timetable efforts to ensure community awareness of the program. The planning staff must then TDR Banks monitor the program to identify stakehold- Temporary and permanent TDR banks ers' concerns and work to rectify any proce- have been established to provide reassur- dural problems. These officials should ance to landowners in sending areas that regularly report to elected community offi- they will recoup lost development potential cials and the public at large about the suc- and to catalyze the sale of TDR credits. cess of the program. The APA also Generally, a TDR bank is a governmentally recommends that agencies specifically iden- funded agency with the power to purchase tify both the actors in the real estate market TDR credits from landowners in sending who will be affected by the TDR program areas if they are otherwise not able to sell and understand their economic motiva- them. If a program is properly established, a tions. Typically there are four essential TDR bank will provide peace of mind to parties to any TDR transaction: landowners but ideally should not have to N the developer of land in the re- be used as a buyer of last resort. Because the ceiving zone, bank will facilitate the sale of TDR credits through the open market, participants N the owner of protected land in the should get more money from developers in sending zone, the receiving area than from the TDR N the units of local government, and bank. TDR banks can serve as centers for N the mortgage lenders. contact between landowners and develop- ers and thereby catalyze the sale of TDR There will be no transfers if there is no credits. They can put interested landowners market for increased development. Devel- in touch with interested developers. Some opers must be anxious to buy and use TDR form of catalyst to encourage this commu- credits, while the owners of sending parcels nication is important to a TDR program must be presented with adequate compen- and real estate agents should also be able to sation for loss of development potential. aid in the sale of TDR credits. Support of the local government must be The APA has concluded that TDR apparent to the community. Planners and banks instill confidence in the community The Etowah Initiative/Summer 1998 7 that credits will be bought for resale at a sue control is the issue of "takings." The later date. In addition, it may act as a stabi- Fifth Amendment in the Bill of Rights lizing force by controlling supply when the guarantees that government can not take prices for credits becomes too low or too physically take property for public purposes high. However, for communities that are without paying for it. This clause permits considering TDR banks, it is recommended the government to physically appropriate that appropriate legislation authorize the private property for government or public establishment of this bank. In addition, use, such as taking land for a public high- local government must decide how much way, by compensating the landowner. In funding to allocate to this bank. some circumstances, the court has held that In some TDR programs, the govern- the government has regulated the use of ment or non-profit organizations may also property to protect the public health and purchase TDR credits for the purpose of welfare in such a manner that it is equiva- retiring them, rather than applying them to lent to a physical taking. In determining other properties. These programs essentially whether a taking has occurred, courts in- pay landowners to place conservation ease- quire whether the owner is left with a rea- ments on their properties. sonable economic use of the property. A regulation that denies the most the most Administrative and Procedural Issues lucrative use of a property does not give rise The agency or department given the to a taking if the landowner still has a rea- responsibility of establishing the TDR pro- sonable economic use of the property. gram must have the capacity both to design Regulations have also been struck and to implement the program. The admin- down as takings when they are found to istrative system should be as fair and simple serve no legitimate public purpose. Courts as possible. Streamlining the system so that consistently recognize that the goals of there is a quick response time will help TDR programs, such as the protection of garner voluntary participation in the pro- open-space and agricultural lands, historic gram. The administration of the program landmarks and environmentally sensitive should reside within a single department, areas, are valid public purposes. although input regarding the legal, eco- The United States Supreme Court has nomic, scientific and planning aspects upheld the TDR program as a valid legal should be sought from other departments tool for historic preservation and environ- and outside sources, when necessary. Scien- mental conservation. In the landmark 1978 tific input is especially important for pro- Penn Central v. City of New York case, the grams designed to protect ecologically Court held that the city could prevent sensitive areas. development of a 70-foot office tower on Finally, it is necessary to establish a top of the Beaux Art Grand Central Sta- recording mechanism for TDR transactions tion. The Court said that by prohibiting to validate the transactions and prevent development on top of the station, the city abuses. Without such recordation the sys- had not denied the landowner of all reason- tem cannot be evaluated and, worse, can- able economic use of the property. In not hope to function properly. reaching its conclusion, the court found that the landowner had not exercised his The Takings Issue right to transfer the development rights to One of the areas of greatest concern the space above the station. The potential among local governments regarding land to sell the development rights above the 8 The Etowah Initiative/Summer 1998 station was a reasonable economic use of gleaned from an estimation of their mar- that property. This decision validated the ket value without actually conducting the use of TDR programs as a conservation transaction. The Court's decision might tool. have been different if the state had pro- Although the Supreme Court has indi- vided a TDR bank as a purchaser of last cated that TDR credits constitute a signifi- resort because in that situation, the State cant part of the determination of whether a would, to an extent, control the value of taking has occurred, it has not decided the TDR credits. whether TDR credits alone can be suffi- In sum, TDR programs have with- cient to ward off a taking. In dicta, i.e. non- stood legal challenge under a takings binding discussion, the court acknowledged theory. A well-constructed TDR ordi- that TDR credits could be a factor in a nance created under state enabling legis- takings analysis but did not discuss what lation or through a municipality or weight this factor could carry. Justice county's home rule powers is likely to Scalia, in Suitum v. Tahoe Regional Plan- withstand legal challenge. The true chal- ning Agency, indicated that TDR credits lenge is designing a TDR program tai- could speak only to the determination of lored to the needs of the county that will whether the landowner was adequately be well supported by landowners and compensated to thereby avoid a taking. In a developers. few cases TDR programs have been chal- lenged on technical grounds. A well-crafted Sources ordinance, backed by state enabling legisla- Richard J. Roddewig and Cheryl A. tion and the local comprehensive land use Inghram, Transferable Development plan, should withstand legal challenge on Rights Programs: TDRs and the Real technical grounds. Estate Marketplace, American Planning The question of when a party can sue Association (APA) (1985). for a taking was also addressed in Suitum v. Tahoe Regional Planning Agency. The Transferable Development Rights, to sell TDR credits before suing for a tak- ing. A two-pronged test was established to Dennis J. McEleney, Using Transferable determine the "ripeness" of the claim. The Development Rights to Preserve Vanish- ing Landscapes and Landmarks, 83 Illi- plaintiff must receive a "final" decision nois Bar Journal 636 (1995). from the agency running the TDR program concerning the affected property and the Norman Marcus, Transferable Develop- plaintiff must exhaust the State's proce- ment Rights: A Current Appraisal, 1 dures for compensation. In Suitum, the Probate and Property 60 (1987). agency running the TDR program downzoned the property and had no more American Farmland Trust Report, Trans- control over the value of the TDR credits fer of Development Rights: What Works so the State's procedures were exhausted. (1997). The plaintiff did not have to go to the free World Wildlife Fund Report, Statewide market for compensation before suing un- Wetland Strategies: Protecting and Man- der a takings theory. The Court decided aging the Resource. that the value of the TDR credits could be The Etowah Initiative/Summer 1998 9 10 The Etowah Initiative/Summer 1998 CASE STUDY Montgomery County Program (Maryland) Purpose of the Program downzoning would be unfair to property The Montgomery County TDR pro- owners and the public acquisition of farm- gram was created in 1978 in an attempt to land would be too costly. It settled on a control and manage urban encroachment TDR program to preserve both farmland from its southern neighbor, Washington, and the viability of agricultural enterprise D.C. Montgomery County still has valuable in the county. rural and agricultural land in need of pro- Prior to the enactment of the TDR tection and sustainable development. program, about 3,500 acres of farmland were converted to urban use each year. Synopsis of the Program Since its enactment in 1980, only 3,000 The program is highly successful and total acres have been converted, an unde- touted throughout the country as a model niable result of the TDR program com- TDR program. As of November 1997, bined with the county and state easement 6,000 TDRs have been purchased and ap- purchase programs. proved for use in receiving areas, protecting 43,000 acres of farmland. How does the TDR Program Operate? In 1980, the county approved and History of the Program and adopted the agricultural and open space Characteristics of the Area preservation plan, designating an Agricul- Montgomery County has a population tural Reserve of 110,000 acres (more than a of roughly 580,000 and a land area of third of the county) and downzoning and 323,000 acres and is bordered by the classifying it as a Rural Density Transfer Potomac River and Frederick and Howard Zone. Planners determined that a farm Counties. Urbanization of the county has needed at least 25 acres in order to operate proceeded at a rapid pace. In 1973, the profitably; thus, the maximum allowable county adopted a five-acre minimum lot- density within the Agricultural Reserve was size requirement in an effort to stem resi- reduced from one dwelling unit per five dential development in prime agricultural acres to one unit per 25 acres. Property areas. That failed to prevent urban en- owners within the Agricultural Reserve croachment, which continued to devour were given one development right for every prime agricultural land. During the 1970s, five acres of farmland they owned. In 1981, Montgomery County lost 18 percent of its an initial receiving area was established for farmland. up to 3,000 development rights, large The Montgomery County Planning enough to receive transfers from 15,000 Commission's concern about further loss acres of Agricultural Reserve land. Thirty- prompted the appointment of a task force five to fifty additional receiving areas have to explore methods of preserving agricul- since been identified. tural uses in the county. Three alternatives The Maryland-National Capital Park were considered: downzoning, outright and Planning Commission, a regional plan- purchase of agricultural land, and a TDR ning agency, worked closely with Mont- program. The task force concluded that gomery County to provide both the The Etowah Initiative/Summer 1998 11 land-use planning and economic analysis to property in accordance with a specific des- ensure that the program would work effec- ignation on the Approved and Adopted tively. Planners and economists recognized Area Master Plan. Once the preliminary that unless their program design was based plan is approved, the developer files a site on the realities of the private real estate plan. Following site plan approval, the market, the program would fail. Although the developer prepares a record plat and sub- program is mandatory in that downzoning mits it to the Montgomery County Plan- occurred, property owners are not required to ning Board along with proof of TDR sell their development rights. ownership. By purchasing development rights, An easement restricting the number of developers in the receiving districts can one-family dwellings and other develop- increase the base density of building sites ment that can be constructed on the farm- by varying amounts, depending on the land in the sending area is prepared. This zoning classification. For example, where restrictive easement is conveyed to the the underlying zoning classification permits County and filed with the deed prior to re- five units per acre, the TDR program allows cording the plat for the receiving area. It is an increase of two units per acre to a total binding on all future owners of the property. of seven units per acre. Realtors list TDRs and earn a commis- The density increase on the receiving sion on transactions; appraisers are using parcels must be at least two-thirds of the comparable sales of TDRs to value the possible maximum density in order to both: rights. Development rights are valued in the private market, without government 1) ensure that receiving areas are involvement; the price is established be- developed to a density sufficient to tween buyer and seller. sustain market demand for TDRs and Activity 2) avoid spreading a few TDR rights As of November 1997, 6,000 TDRs across a large number of receiving have been purchased and approved for use parcels. in receiving areas. About 43,000 acres of farmland have been preserved. (In 1985, For example, on a 20-acre site with these figures were 1,145 TDRs protecting base zoning permitting a total of 100 units 5,725 acres of land.) A one-acre lot in the and a density option of an additional 40 Agricultural Reserve currently is worth units, the developer must purchase at least $5,000; the value would rise dramatically if 27 TDRs and construct at least 127 units the restrictions on the land were removed. (100 + (40 x .667). The procedure for a development Incentives to Use the TDR Program rights transfer is as follows. First, the farm- There were many incentives that con- land owner sells his rights or an option to a tributed to the success of this program. The developer who plans to build in a receiving sending areas had enough development area. The developer then files a preliminary potential to make the sale of development plan of subdivision for the property with rights financially attractive to the farmers the Montgomery County Planning Board, who owned the land, and the receiving using at least two-thirds of the possible sites were in areas where development development rights transferable to that demand was strong enough to create a 12 The Etowah Initiative/Summer 1998 market of willing buyers. Because there has reports that ongoing administrative costs been a soft market for multifamily housing are negligible as the TDR process is incor- in the county, the rights can be applied porated into the subdivision review and only to single-family and townhouse devel- approval process. opment, to ensure that prices and demand Montgomery County has full legisla- for TDRs will be high. The provision of tive control over both sending and receiv- water and sewer services to properties ing areas, having omitted incorporated where TDRs are applied is a priority of the areas from the TDR program. Conse- county government. Furthermore, the quently, developers do not have to cope County launched an extensive educational with a multi tiered review and approval effort to sell the program to both buyers process, and the county does not have to be and sellers. concerned about compatibility with other local governments' planning and zoning Education Efforts requirements. The county's educational program included comprehensive reports to the Litigation public on the Montgomery County Master In the first case against Montgomery Plan and a Questions & Answer booklet for County, the court ruled that the property owners. downzoning necessary to implement the TDR program was legal. The court said Purchase of Development that the zoning ordinance substantially Rights (PDRs) advanced legitimate government goals, and A County Development Rights Fund the economic impact was not so severe as was established to act as buyer of last resort to amount to a taking of property. In so and to provide guarantees for loans that ruling, it was not necessary to examine the used the value of development rights still legality of the TDR program. attached to farmland as collateral. The fund In West Montgomery County Citizen's was designed to "bank" TDRs, then sell Association v. Maryland National Capital them at auction to the highest bidder. Loan Parks and Planning Commission (1987), guarantees are available for up to 75 per- Maryland's highest court ruled against the cent of the market value of the farm for a county's TDR plan because it designated term not to exceed five years. Because the receiving zones by amendments to the private market has been strong enough to master plan instead of amendments to the support the TDR program, the county fund zoning ordinance. The court ruled that has not been used. there are substantial differences between the planning and zoning functions. The Buybacks court said it was necessary to amend the TDRs cannot be recaptured or bought zoning ordinance and the zoning map, back. When TDRs are sold, they are perma- which was subsequently done. nently removed from the property described The final case against Montgomery in the easement. County's TDR program challenged the county's policy that TDRs could not be Administrative Costs transferred outside the area covered by a The initial effort required the alloca- given master plan. The court ruled that the tion of staff resources. Montgomery County county could not restrict TDR transfers to a given master plan area. The Etowah Initiative/Summer 1998 13 Why was the program successful? Sources Montgomery County's TDR program Interview with Dennis Canavan, Mary- succeeded because it fulfilled the following land-National Capital Park and Planning critical conditions for a workable program: Commission, 8787 Georgia Avenue, Sil- ver Spring, MD 20910-3760. Phone N There were sufficient restrictions on sending areas to give rise to (301) 495-4595; Fax (301) 495-1306. TDR sales. Evaluating Innovative Techniques for N Receiving sites were designated Resource Lands, Part II: Transfer of De- that had infrastructure capability velopment Rights. State of Washington, and sufficient development de- Department of Community Development, mand to make additional density Growth Management Division, 1992. increases attractive to developers. Fehr, Stephen C. "Montgomery's Line of N There was a recognition of the Defense Against the Suburban Invasion." economic and financial conditions The Washington Post, page A01, Tues- that underpin a TDR market and day, March 25, 1997. determine the value of TDRs to both sellers and buyers. Heiberg, Dana E. "The Reality of TDR." Urban Land 34 September 91. N The program design is simple and understandable and does not re- quire complex approvals. N The local government had a com- mitment to an educational effort to inform landowners, developers, realtors, and attorneys about the program. The emphasis is on the TDR program as "working in con- junction with the housing market" rather than as a "no growth sce- nario." "Market forces are not stopped, but are redirected." 14 The Etowah Initiative/Summer 1998 CASE STUDY The Pinelands Commission Program (New Jersey) Purpose of the Program planning body. State legislation­the The Pinelands Commission's goal is to Pinelands Protection Act­endorsed the preserve and protect the natural resources planning process and also promulgated of the Pinelands region. This objective is Transferable Development Rights as one obtained by transferring development cred- possible method of controlling growth and its from designated preservation areas to development. designated growth areas. The transfer A unique aspect of the Pinelands plan achieves the goal of conserving the is that it encompasses seven counties (At- Pinelands natural resources, compensating lantic, Burlington, Camden, Cape May, the property owners, and allowing develop- Cumberland, Gloucester, and Ocean) and ers to increase density where appropriate. fifty-three municipalities. These seven counties were required to prepare local Synopsis of the Program land-use regulations consistent with the The Pinelands program is multi-juris- comprehensive plan. The region was di- dictional, encompassing seven counties. It vided into management districts to aid in has been very successful, protecting over rezoning and the allocation of development 100,000 acres of land. The vast scope of the rights based upon the land type. The man- program coupled with its overwhelming agement districts include: Preservation (for success has made the Pinelands a national the most sensitive land-wetlands), Forest, model for transferable development rights Agricultural, Rural Development, Regional programs. The history of the Pinelands Growth, and Pinelands Village and Towns program exemplifies the cooperation District. needed between the state and the various counties and municipalities to commence a How does the TDR Program Operate? successful and long lasting land manage- The Pinelands Development Credit ment program. (PDC) program is a major component of the comprehensive management plan. It History of the Program and creates development rights that are given Characteristics of the Area to property owners in regions that are des- In the 1970's the expansion of Atlantic ignated as preservation areas. The property City combined with the growth of the gam- owners in these areas are then able to sell bling industry, retirement housing, and the rights to developers in areas that have other development threatened the been designated as regional growth areas. Pinelands region, which is an ecologically Once the property owner sells the PDCs significant area in southeastern New Jersey. they are required to deed restrict their land The Pinelands Commission was formed in through conservation easements to insure 1979 to develop a plan to protect the for- that future development is prohibited. ests, wetlands, creeks and rivers of the area. Thus, the property owners are compensated Federal legislation was passed establish- for the loss of future development, develop- ing the Pinelands Preserve and a regional ers are allowed to increase densities in The Etowah Initiative/Summer 1998 15 specified growth areas, and the land is pre- mission handled over 1,287 development served for generations to come. applications. There was a definite increase The PDC program operates in 39-acre in the program's activity once the PDC increments. Woodlands, for example, are bank was established to facilitate the trans- given one development credit per 39 acres. actions between developers and property Farmland, because it is more valuable than owners. With a greater demand for PDCs woodland, is given two development cred- than available PDCs, interest in the its per 39 acres. Because wetlands have the Pinelands program should remain strong. least development potential, they have been assigned 0.2 credits per 39 acres. Each Incentives to Use the TDR Program development credit allows the purchaser to The major incentive is the require- develop four extra residential units in the ment that developers must purchase PDCs designated growth areas. in order to increase density. In other words, A recent key addition to the PDC the Pinelands Commission created the program has been the institution of the incentive by eliminating other methods of Pinelands Development Credit Bank, au- increasing density. This insures that the thorized by the New Jersey legislature, program will have a potential user base and which has helped to bring interested parties therefore increases the likelihood of activ- together and also to acquire credits and ity. It has made the purchase of PDCs rela- preserve particularly sensitive regions. The tively easy with little or no transaction bank was created with $1.5 million in costs. bonds with the goal of stimulating the private market and acting as a buyer of last Education Efforts resort. In its first years the bank purchased The Pinelands Commission has one 91.75 PDCs and sold 8.75. The program staff member in charge of educating the has subsequently provided for the preserva- public about TDRs and the Pinelands tion of over 100,000 acres of land. The sale project. It also has a web page that provides price has typically been $10,000 for one information about the history of the Pineland Development Credit. Since the Pinelands and explains how to obtain creation of the bank there has been an newsletters and other information. From its appreciable increase in the amount of trad- inception, the Commission made the com- ing. The Bank's role in the future will likely munity aware of the program's goals and be to identify sellers of PDCs and then how it would operate. inform developers who are willing to pur- chase the credits, but who may have prob- TDR Banking lems identifying and contacting sellers. It is The Pinelands Commission has set up likely that there would have been a much a PDC banking system that facilitates the more active trading market had the bank, transfer of development credits from the acting as the middleman, been in place property owners to the developers. The since the start of the program. bank will also act as a buyer of last resort and will purchase development credits to Activity preserve land that it deems critical. Over 85,000 acres of the Pinelands have been transferred to state ownership Buybacks under the PDC program. In 1996 the Com- Buybacks are not allowed under the Pinelands TDR Program. 16 The Etowah Initiative/Summer 1998 Administrative Costs way to increase density is by using The 1997 operating budget of the the Pinelands Development Cred- Pinelands Commission is $3,358,392. Be- its. The Commission has control cause of the enormous breadth of the over both the PDC sending and Pinelands operation there is a great deal of receiving sights. administrative cost. A large portion of the N The Commission has clearly money, approximately $2,700,000, comes spelled out the objectives and from the state of New Jersey. The addi- operation of the program. tional money is acquired through the fed- N There is a strong regional interest eral government, the accumulation of in protecting the New Jersey interest, and other sources. The largest Pinelands. expense is personnel. Other categories of expenses include: supplies, services, mainte- * The Development Credits may be nance, capital improvements and acquisi- applied within a wide area. The tions, debt service, and local grants. Pinelands are in close proximity to Atlantic City, Philadelphia, New Litigation York City/Northern New Jersey. This leaves a large market in Though there have been challenges to which the development credits the Pinelands Commission, they have may be used, and there is a per- never been successful in part because the ceived need for increasing the Commission's power is derived from both density of development in these federal and state enabling legislation. areas. Why was the program successful? N The program is set up so that It is important to understand why the property owners know the cat- Pineland PDC program has been so success- egory that their land falls within ful: and the number of PDCs that they will receive for their land. N The counties and municipalities cooperated to make their indi- N The Pinelands Development vidual plans and zoning ordinances Credit Bank has helped reduce consistent with the comprehensive transaction costs so that they are Pinelands plan. now minimal. N The Pinelands Commission is involved in all potential develop- Sources ment changes that the various Pinelands Web Page: www.burlco.lib.nj.us/ communities propose. pinelands. N The Pinelands Commission has a permanent staff with expert Thurston County, Washington Transfer of Development Rights Feasibility Study. knowledge in technical problems, economics and the law. Transferable Development Rights Pro- N The development exchange is the grams: TDRs and the Real Estate Market- primary mechanism for developers place. Richard J. Roddewig and Cheryl A. to increase their zoning density. It Inghram. is difficult to upzone, so the easiest The Etowah Initiative/Summer 1998 17 "New Jersey's Special Place: Pinelands National Reserve." Terrence D. Moore. New Jersey Lawyer, the Magazine, April 1995. Impact of Regional Land-Use Controls on Property Values: The Case of the New Jersey Pinelands. W. Patrick Beaton. Land Economics, May 1991. Recent Developments in Environmental Preservation and the Rights of Property Owners. Linda Bozung and Deborah J. Alessi. Urban Lawyer, Fall 1988. Institutional Guidelines for Designing Suc- cessful Transferable Rights Programs. James T.B. Tripp and Daniel J. Dudek. Yale Jour- nal on Regulation, Summer 1989. Interviews with Betsy Carpenter (609) 894- 9342 and Larry Liggett: (609) 894-9342 of the Pinelands Commission. 18 The Etowah Initiative/Summer 1998 CASE STUDY Calvert County Program (Maryland) Purpose of the Program program. The purpose of Calvert County's trans- After several years of successful de- ferable development rights program is to velopment right transfers, Calvert offer incentive for the preservation of the County amended the TDR program. The remaining agricultural and forested land first change was the designation of receiv- within the county and to guide develop- ing areas to streamline the process. Prior ment to more suitable areas. The TDR to 1993, receiving areas were designated program allows the county to benefit from on an as needed basis which slowed the the conservation of these lands without transfer process. The designation of re- burdening taxpayers with acquisition costs. ceiving areas was accomplished via the Finally, the transfer of development rights creation of a Transfer Zone Districts can help maintain the rural atmosphere Overlay for the county zoning plan. An- that attracted so many of the current resi- other change was the creation of the dents to the area. Purchase and Retirement Fund (PAR) whereby the county can purchase and Synopsis of the Program retire a certain number of development A landowner within an Agricultural rights each year (see more on PARs in the Preservation District (APD) may sell their Purchase and Retirement section below). development rights while maintaining the The final amendment was the Mandatory right to continue farming or engaging in Clustering Provision which requires that forestry activities. These transferred devel- 50-80% of the land within all new subdi- opment rights can only be applied to the visions be preserved as open space. Three construction of family or tenant housing new zoning overlays that assist in the with no allowance for commercial or indus- preservation of rural and farming commu- trial use. Free market forces determine nities as well as other significant natural valuation of all development rights. The resource areas were added. county's major role in these transactions is The TDR program has resulted in the to qualify lands for participation (for both preservation of one-third of Calvert sending and receiving areas), to officiate County for agricultural or forestry pro- the actual transfer of development rights, duction. and to approve the language of the conser- vation easement placed on the sending site. How Does the TDR Program Operate? For a landowner to qualify to sell History of the Program and development rights, their property must Characteristics of the Area be enrolled within an Agricultural Preser- This program was enacted in 1978 with vation District. They may apply to either the goal of preserving the remaining farm the state or county APD program or both, and forested land in the county through the but the landowner cannot gain financial development of Agricultural Preservation benefit from both. If an application is Districts (APDs). Calvert was the first successful, it is recorded with either the county in Maryland to establish an APD state or county. The Etowah Initiative/Summer 1998 19 Once the property is enrolled, the the county for public facilities and utilities. landowner prepares a plan documenting The most obvious benefit from having one's land use (agricultural or forest). The num- land in an APD is the potential of selling ber of development rights accompanying the development rights. the land is certified and a covenant restrict- For developers, the main incentive for ing the land's use to farming or forestry using the TDR program is the ease with activities is recorded. Finally, a develop- which it allows for the densification of a ment option agreement is negotiated. At property. The developer does not have to this point, the rights may be transferred submit a time-consuming application for If the owner has chosen the state APD, increased development with its attendant the rights can be sold to the state in the meetings with the Planning Commission. form of a conservation easement. The Although it is possible to petition the Plan- transfer of an easement involves (1) the ning Commission for increased density, it is implementation of a soil and water conser- easier to receive a density increase through vation plan; (2) a calculation of the value the TDR program. In fact, there have not of the easement; and (3) acceptance of the been any applications for upzoning since application by the Maryland Agricultural the TDR program began in 1978. The Land Preservation Foundation which Transfer Zone District Overlay created in makes decisions on a biannual basis. 1993 makes use of the TDR program even Both the state and county programs are easier than before. driven by a free-market system in which buyers and sellers make all decisions regard- Education efforts ing the price paid for development rights. This program has been so overwhelm- ingly supported by the landowners and Activity developers in Calvert County that very By all accounts, the Calvert County little outreach was necessary to generate program has achieved its target goals. Of interest in the program. Recently, a part- the desired 20,000 acres for preservation, time employee was hired to inform the nearly 18,000 have been enrolled in either remaining landowners of the TDR the County or State Agricultural Preserva- program's existence and benefits. The new tion Districts. education coordinator conducts group and Within a recent two-month period individual meetings. approximately $900,000 of development rights were transferred via the programs. Purchase and Retirement Fund For the year 1997, development rights sales The county annually purchases devel- averaged $2,400 per acre. opment rights through the Purchase and Retirement Fund (PAR). This is a program Incentives to use the TDR program operated with county funds matched by There are incentives for both landown- state funds from the Agricultural Transfer ers and developers who use the TDR pro- tax. The rights are permanently retired gram. Once a tract is enrolled within an rather than made available for re-sale to APD the owner does not pay property taxes developers. The PAR has funded the pres- on the land itself though taxes are still ervation of approximately 2,000 acres. assessed on houses and house lots. Land in Additionally, there is a conservation an APD is protected from condemnation by easement program at the state level. Through this program, the state purchases 20 The Etowah Initiative/Summer 1998 conservation easements from farmers. The county added a part-time employee to assist value of an easement, which is paid by the in landowner education. state, is the difference between the land's value for development and its value as Litigation farmland. The state retires the development There is no litigation pending against right permanently. Calvert's TDR plan, nor has there been any in the past. The program seems to be well Buybacks accepted by all parties. The Calvert County system does not provide an opportunity for landowners to Why was the program successful? repurchase development rights they sold in The Calvert County TDR program was the past. Instead land from which develop- successful because of the valuable incen- ment rights have been sold is permanently tives for landowners and developers to use committed to agriculture or forestry. Land- the program. Moreover, the program was owners are permitted to construct tenant designed to preserve the rural nature of the housing so long as the density does not county which attracted many landowners to exceed one house per 25 acres. the area in the first place. The state system allows for a rights buyback. However, this can occur only after Sources the development rights have been sold for Chesapeake Bay Program WWWebpage, 25 or more years. This option has not been Case study on Calvert County used by landowners in Calvert County. provision would substantially weaken their TDR program. They suggest that a TDR Interview with Gregory Bowen, Deputy should be like most other forms of real Director, Calvert County Department of estate transactions (i.e., outright sale of Planning and Zoning, 176 Main Street, land, sale of mineral rights, etc.) which are Prince Frederick, MD 20678, (410) 535- permanent in nature. 2348 Administrative costs Agricultural Preservation Rules and Regu- lations, Prepared by the Calvert County Throughout the history of this pro- Agricultural Preservation Advisory Board, gram, the administrative costs have been July 1, 1996. very low. The only staff necessary to process applications and file transfers are a full-time Calvert County Agricultural Preservation secretary and the deputy director, who Program Brochure, Prepared by the Calvert spends approximately one tenth of his time County Agricultural Preservation Advisory administering the program. Recently, the Board, January 1995. The Etowah Initiative/Summer 1998 21 22 The Etowah Initiative/Summer 1998 CASE STUDY San Luis Obispo County Program (California) Purpose of the Program Synopsis of the Program San Luis Obispo (SLO) County devel- The program is voluntary, incentive- oped a transferable development credit based, and market driven between willing (TDC) program in order to retire rural lots sellers and willing buyers. Landowners are in areas of the county where infrastructure not obligated to use this technique to re- is lacking. In addition to reducing develop- quest an amendment to the general plan or ment in the outlying rural areas, the pro- to subdivide property in conformance with gram preserves agricultural and other existing regulations. natural resources. The 1996 amendments to the TDC History of the Program and legislation characterize the primary purpose Characteristics of the Area of the TDC program as one designed "to In 1989, the Board of Supervisors of promote appropriate settlement patterns San Luis Obispo County appointed a Blue while maintaining an overall level of devel- Ribbon Committee to study the county's opment within the capacities of transporta- growth patterns. Rural areas were of par- tion and other public service systems. As a ticular concern. The resulting Rural Settle- countywide program it endeavors to: ment Pattern Strategy suggested a phased approach whereby the county surveyed N protect both land with agricultural capability and the business of agri- available lots and growth patterns and then culture itself; issued recommendations on how to cope with the effects of growth on environmen- N reduce development potential tal resources. It concluded that a TDC within land divisions or other program would best achieve these aims. areas that do not have adequate services for residents; The county's resources as outlined by the N protect important or extraordinary Strategy are presented below: natural areas, habitats or cultural N A large number of existing vacant resources; reduce development lots in the rural areas of the potential in areas that may have county would support develop- the potential for landslides, fires, ment without the need for further or other hazards; subdivision. N and reduce air quality impacts N The overall pattern of develop- associated with locating residential ment (as seen in building permit development distant from jobs, activity, creation of new lots and schools, shopping and recreation." certificates of compliance) had (Amendments to Framework for shifted into the outlying rural Planning­Inland Adopted October areas. New development was oc- 8, 1996 Resolution No. 96-385) curring farther away from the edge of existing rural communities. The Etowah Initiative/Summer 1998 23 N The historical pattern of land use It noted that the acceptance of a TDC decisions and new development, as program in a community was going to de- projected by the existing general pend upon the acceptability of the specific plan, was putting pressure on areas to be protected and the manner in prime agricultural lands. which additional development would be N Many "rural" areas of the county designated and developed. were committed to residential In 1993, the Transfer of Development home sites. Credit Technical Advisory Committee (TAC) began to review the issues associ- The Strategy also determined that the ated with the development of a TDC pro- outlying rural areas of the county, where gram. TAC was comprised of citizens parcels were larger than 160 acres, con- ranging from ranchers to real estate bro- tained a majority of the county's agricul- kers. This committee documented settle- tural and natural resources. Serving ment patterns on a regional basis and residential uses of those areas would be suggested criteria for sending and receiving expensive as adequate infrastructure did areas. However, one of its most salient not exist. Therefore, those areas were recommendations was a pilot project that deemed to be the most suitable for protec- the Board of Supervisors approved. tion. The Strategy determined that land TAC changed some aspects of the adjacent to existing urban areas was the program based on the results of this trial only suitable area for increased develop- run. First, it determined the program ment. should run countywide instead of on a regional basis. Second, TAC designated The Strategy outlined, in order of more sending and receiving sites. TAC has priority, the following objectives for land subsequently issued a number of project use planning in SLO County: reports summarizing the experiences of the two-and-a half years of the pilot. N Concentrate development in ur- ban areas. How Does the TDC Program Operate? N Locate new development in close To be eligible for the TDC program, proximity to existing urban areas. the sending tract must meet criteria for N Look carefully at the "critical either agricultural land, resource land (wet- transition area" surrounding the lands, oak wetlands, etc.), or antiquated urban areas. This is where there is subdivisions. Antiquated subdivisions are a fragmented pattern of develop- defined as lots without adequate infrastruc- ment and where the county could ture or services that if developed, would lose its rural character. result in growth above that anticipated by the general plan. Both specific and general N Hold the line in outlying areas. Protect the existing agricultural criteria have been established; the specific and rural character of the areas by criteria are designed to be clear and easy to retaining existing uses and lot understand while the general criteria pro- sizes. vide flexibility when the area does not satisfy specific standards. In order to further these objectives, the Development potential of a tract may Strategy recommended the TDC program. be limited by easement in one of two ways. 24 The Etowah Initiative/Summer 1998 One easement removes the potential for Preliminary Determination does not guar- any residential use. This easement is used antee that the property will be eligible as a for sites that qualified using the agricultural receiving site. It is a simplified review pro- criteria. A second easement is even more cess for those owners curious about the restrictive. As an incentive to encourage potential for TDCs. landowners to enter into more restrictive The planning staff reviews the applica- easements, bonus credits are available for tion and submits a recommendation to the any natural resources that will be protected applicable Review Authority (in the case of on the land. a tentative map) or the TDC Review Com- The landowner submits an application mittee. The county decides if the site is along with a deed to the county. The appli- eligible and how much of a density bonus cation will designate the sending parcel as should be granted. eligible for either full or partial develop- The buyer may then shop for TDCs. ment rights. If the owner wishes to reserve The buyer and seller fix the price for the some development potential (aside from credits. There are no specifications on the residential development), he/she must kind of financial arrangement made be- apply for a partial development credit. If tween the two parties. A seller may partici- the owner wishes to give the entire prop- pate as an equity participant in the project erty to a public or non-profit (tax-exempt) where TDCs are used. agency, he/she will receive TDCs based In addition, the buyer is not required upon the full value of the property. The to show proof of ownership (or spend any number of credits that will be assigned to a money on TDCs) until he/she is ready to specific tract will be based on the value of record the final map. When the map is the land as determined by a professional ready to be recorded, the seller and buyer appraiser. go to the TDC Administrator to obtain The TAC formally reviews the applica- legal title to the TDCs. If all credits are not tion and sends a "Notice of Eligibility" desired by the buyer, the seller receives a notifying the owner of qualification as a new certificate for the remainder. Once the sending site and the amount of credits the buyer purchases the TDCs, they must be land will receive. used on the project. The ordinance has The owner then enters into a perma- been written to prevent speculation by nent conservation easement to run with the private individuals. However, non-profits land. After this easement is recorded, the may purchase TDCs to permanently retire TDC Administrator issues a TDC Certifi- the lots. The definition of a non-profit is cate of Sending Credits. The county then any tax-exempt organization and may in- amends the General Plan to mark this clude churches, libraries, and environmen- property as a sending site. At this stage, the tal organizations. owner may also apply for a review of the After the Receipt of Transfer is re- property tax assessment. The degree of the corded with the county, the map is re- local property tax relief is dependent on the corded with the additional densities facts of the particular situation. allowed by the TDCs. In order to use the TDCs on a particu- Until a TDC Administrator is hired, lar receiving site, the developer may file the planning department is performing the either for a "Preliminary Determination" or Administrator's functions. These include a "Determination with Tentative Map". A keeping track of how many TDCs are as- The Etowah Initiative/Summer 1998 25 signed to a property, which TDCs have and farm, selling the TDCs may result in been used, to whom TDCs were transferred, enough funding to retire outstanding loans. and how many TDCs are available for sale. Receiving sites may be developed more The Administrator typically would be a densely than normally allowed when the title company charging a fee for its services. owners purchase TDCs. The criteria for The county is not involved in buying bonus densities are based on the distance credits to retire them. However, the ordi- from urban areas and the availability of nance is designed to allow non-profit and services. In addition, planning staff will government agencies to buy credits for that prioritize the processing of applications for purpose. those sites that have qualified for density bonuses based upon protection of natural Activity resources. There has been no transfer of TDCs to Under current regulations, the owner is date due to pending litigation. (See the not obligated to use TDCs when applying section on Litigation, below.) However, for denser development of their property there have been two applications for send- and can obtain approval for denser devel- ing sites. The first site is a ranch owned by opment through a General Plan Amend- an elderly man who wishes to leave to his ment or subdivision of their property. daughters the development credits, and his However, planners hope that the TDC son the actual land. The land is extremely program will be a more attractive option valuable. The rancher wants to ensure that than amending the General Plan. Califor- his son will not be forced to pay enormous nia law dictates that the plan may only be inheritance taxes, thus he is severing the amended three times per year in coastal development rights to decrease the land's zones and four times per year in inland worth. The second site is also a ranch zones. This requirement makes applications whose owner is interested in decreasing tedious and slow for developers wishing to development potential in order to decrease exceed current density regulations. There both property and income taxes. have been no amendments to the General Plan since the TDC program was imple- Incentives to Use the TDC Program mented, indicating that upzoning has not The ordinance attempts to provide contributed to the program's inactivity. incentives to both sending and receiving site owners to use the program. Sending Education Efforts sites are awarded credits based upon the The county has prepared a question development worth of the land. The land- and answer brochure to assist the public. owner may determine this value through a The members of the TAC also present the professional appraisal by subtracting the ordinance to civic organizations and answer "before and after" values of development. questions. The ordinance provides for the However, for those who would prefer to early notification of neighbors of potential avoid the cost of an appraisal, the ordi- receiving sites so they may comment upon nance allows the use of a figure of 50% of the request. the worth of those properties that have When the program was first imple- been recently assessed. The credits them- mented, the planning staff organized a selves are a valuable asset to many farmers. conference to educate potential partici- For those who wish to remain on the land pants about the program. In addition, the 26 The Etowah Initiative/Summer 1998 TDC program was covered extensively in the decreased development of the the media, as it is an innovative program sending site nearby. However, if and the first of its kind in the area. The the buyer can demonstrate that planning staff has been reluctant to continue there are no TDCs available, the advertising efforts until it resolves the issues buyer may search for credits within associated with the pending litigation. a broader geographic region. N The TAC established a TDR Re- Some Amendments Resulting view Committee to make deci- from the Pilot Project sions regarding the eligibility of N Environmental review is required sending sites, sending site bonuses, of all actions, even a sending site and preliminary determinations for designation. The ordinance em- receiving sites. This committee is phasizes timeliness and prompt comprised of eight people from the response from the county to the community with a variety of expe- landowner. riences. N Criteria (general and specific) are N To instill confidence in the sys- used instead of mapping sending tem, there is a three-step process sites. There were two reasons for to confirm that the county has a this decision. First, the county record of all TDC transactions. determined that pre-designation of First, the Final Map incorporates a sending sites might adversely affect note indicating which TDCs were the owner's ability to borrow used by specifying their registra- money on the land. Second, a tion numbers. The Administrator landowner may have better knowl- will also be notified that the TDCs edge of important natural resources have been released to the county. than the government does. In In addition, the landowner turns addition, the specific criteria make over the Receipt of Transfer to the it easy for landowners to determine county. if they qualify, and the specific criteria allow for more flexibility. Buybacks N The TAC developed bonus credits In order to receive TDCs, the owner of for sending sites to preserve natu- the sending parcel must enter into a con- ral resources as a further incentive. servation easement. California law dictates For each wetland, woodland, etc., that only a court proceeding can dissolve listed in the existing documenta- an easement. The county planner ex- tion criteria in the ordinance, the plained that the only feasible way for the county awards an extra ten- per- owner of a sending area to repurchase de- cent of the total credits for which velopment rights is to later qualify as a the land was eligible. receiving site. However, this is improbable in most cases. Currently, county planners N The ordinance also requires that buyers of TDCs search for credits direct landowners concerned about perma- within a three-mile radius. This nently selling the development rights to ensures that those who live near a subdivide the parcel before applying for receiving site will also benefit from credits, thereby only placing the easement on part of the land. The Etowah Initiative/Summer 1998 27 Litigation Sources The county is currently involved in Transfer of Development Credits: The San litigation concerning the TDC program. Luis Obispo County TDC Program. Citizens for Rural Preservation, a group comprised of county developers, has chal- Interview with Kami Griffin, Senior Plan- lenged the program, asserting that the re- ner, San Luis Obispo County Department ceiving sites will generate environmental of Planning and Building, 805-781-5193. impacts and under the California Environ- mental Quality Act, the county must pre- pare an environmental impact statement (EIS) for each of these sites. The county's defense is that by its very definition in- creased development of an acceptable re- ceiving site will not create an environmental impact. A court date has not yet been set. Why hasn't the program been successful? Because of pending litigation, the pro- gram has stalled. Moreover, the election of a pro-development Planning Board may jeopardize the time and resources the staff devotes to the success of the program. 28 The Etowah Initiative/Summer 1998 CASE STUDY Thurston Country Program (Washington) Purpose of the Program N Legal description and parcel num- Thurston County is committed to bers of the Sending Area parcel preserving its natural and scenic resources. N A title report showing that the Ordinance No. 11069, 01/01/96 states, applicant is the owner of the sub- "The purpose of this chapter is to encour- ject sending area parcel age the conservation of long-term commer- N Number of non-family member cially significant agricultural lands by allowing units and non-farm housing units owners of such lands to realize the equity in on parcel the land's development potential without conversion to non-agricultural uses." N Number of family member units and farm housing units on parcel Synopsis of the Program N A review fee The Transfer of Development Rights (TDR) program is a voluntary program After the county reviews this informa- whereby property owners may sell county- tion, it awards the property owner a Certifi- awarded TDR credits to other parcels of cation of Transferable Development Rights. land. There is no expenditure of public The landowner records an easement with funds as the system is market-driven. The the Thurston County Auditor. Thurston county designated a "Long-Term Agricul- County holds the easement. tural District" in which all areas of land When the landowner is ready to sell receive one credit per five acres. the TDRs, he/she presents the Thurston County Auditor with a Deed of Transfer History of the Program and form that the Auditor will record, along Characteristics of the Area with the easement. Applicants pay record- In the 1990s, the county began to focus ing, application and transferring fees. upon agricultural preservation issues. While Although a developer may petition for researching strategies, the Board of Supervi- denser development, the county planner sors conducted a TDR feasibility study to stated that it is not used very often, as it determine if the community would support requires an amendment to the General such a program. After extensive research, Plan which is only permitted once per year. the county adopted the program and enacted Anyone may purchase TDRs; however an ordinance effective January 1, 1996. the county does not purchase credits to permanently retire the development rights. How Does the TDR Program Operate? The ordinance allows for sellers of TDRs to In order to sell TDRs, the property transfer credits to an intermediate transf- owner must complete an application with eror or broker who may hold them for a the following pieces of information: period of time before they are used on a receiving area parcel. N A map of the proposed Sending Area parcel (based on a field sur- vey) prepared by a registered land surveyor The Etowah Initiative/Summer 1998 29 Activity Buybacks Since the program was enacted in The easement placed upon the sending 1996, there has been no activity. The areas is perpetual. TDRs may not be bought county planner attributed inactivity to back at a future time. skepticism of county government. In addi- tion, she stated that the requirement that Administration Costs owners of sending areas present the county The county planner estimated that the with a survey in order to receive certificates county spends $10,000 and 10 days of staff was another hindrance. Many farmers do time per year on administrative costs re- not have the funds available to hire profes- lated to the program. sionals to survey the land. On the receiving side, she noted that the market has not Litigation been such that developers are anxious to There has been no litigation in exceed current density levels. Thurston County related to the TDR pro- gram. Incentives to Use the TDR program Besides awarding development credits, Why wasn't the program successful? the county has not created additional in- The Thurston County program did not centives for preserving sensitive land. The have adequate incentives for landowners to county planner explained that the feasibil- sell TDR credits. In addition, there was ity study recommended several tiers for little or no demand for denser development awarding credits, but county officials de- in the receiving area. cided this system was too complex for land- owners to understand and would hinder Sources their willingness to participate in the pro- Thurston County Transfer of Development gram. As a result, all agricultural land re- Rights Program Information Kit ceives the same amount of credits. Interview with Jacqueline Kettman, Associ- Education Efforts ate Planner, Thurston County Community At the beginning stages of the and Environmental Programs. program's implementation, the county held a public forum where thirty potential pro- gram participants were able to ask questions and voice concerns. There have been few subsequent educational efforts, although most citizens are aware of the program through media exposure. The county has compiled a folder with easy to read, color- coded sheets detailing steps for applying for credits or receiving site status. Planning staff appealed to the Board of Supervisors for permission to devote more time to edu- cational efforts, but the Board decided that the staff had other priorities. 30 The Etowah Initiative/Summer 1998 CASE STUDY Collier County Program (Florida) Purpose of the Program How Does the TDR Program Operate? The TDR program in Collier County The ordinance created an overlay was intended to protect more than 40,000 zoning classification for environmentally acres of environmentally sensitive land, sensitive lands known as the Special Treat- including barrier islands, mangroves, salt- ment Overlay District. The initial designa- water marshes, coastal beaches, and cypress tion was not accompanied by downzoning stands, especially lands important to water (downzoning of the overlay districts did storage and recharge in areas of cypress occur some years later in 1982) but new growth. The concept is to offer an alterna- development was regulated and could not tive method of protecting these environ- occur without review of site development mentally sensitive areas through the plans by the planning commission and transfer of residential development permit- approval by the board of county commis- ted on these lands to properties better sioners. suited for development. The development rights are considered as interests in real property and can be History of the Program and transferred in portions or as a total. Once Characteristics of the Area used, the residential development rights Collier County, on the west coast of shall not be used again and the residential Florida, is the state's second-largest county development rights of the subject lands in land area and one of its fastest growing. providing them shall be severed forever. Naples, the principal city, has a population Landowners with two or more acres, of about 20,000 out of a total county popu- excluding submerged land, in the overlay lation of 117,000. Of the county's 1.3 mil- zone may elect to transfer up to one-half lion acres, fully 40 percent is under federal (.5) of a residential unit for each acre or state ownership, and governmental ac- owned. Upon approval of the transfer, the quisition of sensitive Everglades and Big ordinance encourages property owners to Cypress Preserve lands continues. donate the land to a private not-for profit Collier County passed its first TDR conservation or environmental organiza- ordinance in 1974 and substantially tion, but gives the option of entering into amended it in 1979. Modifications elimi- an agreement with the county to maintain nated a requirement that transfers occur the land as undeveloped open space. The between parcels of contiguous, environ- county must approve the transfer, although mentally sensitive land and parcels of non- the TDRs do not have to be committed to sensitive land. They also streamlined the a particular receiving site at the time they review and approval process. Somewhat are severed from the parcel. surprisingly, however, more TDR activity The development rights may be trans- occurred prior to the 1979 amendments ferred to residential multifamily and resi- than after them. dential tourist districts. Depending on the zoning classification of the receiving site, density increases of 10 percent or 20 per- cent over the underlying zoning may be The Etowah Initiative/Summer 1998 31 achieved. Only lands with an "ST" designa- 8. The owner of the sending land will tion can be sending areas; these include provide a guarantee, agreeable to lands that are environmentally sensitive or and approved by ordinance of the have historical or archaeological signifi- board of county commissioners, cance and that are nor adequately pro- that the sending land will be uti- tected by the underlying zoning district lized only for one or more of the regulations. However, a concern of plan- following purposes: ners in Collier County is that by limiting a N increasing public recreational TDR program to ST lands, many other and/or educational opportuni- properties are precluded from using the ties, TDR program. Any owner of eligible land may apply N creation of linkages between for a TDR either separately or concurrently public and private open space, with rezoning, zoning ordinance amend- N protection of critical habitat/ ments, preliminary subdivision plat or de- ecosystems, velopment plan. Prior to the approval of N or other public purpose as speci- any TDR or the issuance of any building permits in connection with the use of any fied in the ordinance of adop- transfer of development rights, the peti- tion. tioner submits the following information and data to the development services direc- Such a guarantee should be recorded tor for review and action by the board of with the clerk of the circuit court of Collier county commissioners. County, Florida as a recorded restriction of 1. Name and address of property the use of such land and shall be binding owner of sending land. upon all present and subsequent owners, 2. Name and address of property heirs, or assigns of such property. Such owner of receiving land. restriction may not be amended, deleted, or otherwise altered, except by a majority vote 3. Legal description of sending land of the board of county commissioners. from which transfer of residential Status of the residential units may vary development rights is petitioned. depending on when they were constructed. 4. Survey of sending land from which Upon the issuance of any permit for the transfer of residential development construction of residential unit(s) upon the rights is requested. receiving land, the first residential units 5. Legal description of receiving land built thereon are considered the residential which receives the transfer of units approved for the TDR. The succeed- residential development rights. ing residential units constructed will be 6. Survey of the land that receives considered the residential units permitted the transfer of residential develop- under the basic zoning district regulations. ment rights. This provision eliminates confusion as to which particular construction on the re- 7. Three copies of an executed deed ceiving land has been approved to super- of transfer of ownership of the sede the zoning development or density sending property to the county or allowances. a state or federal agency, or to a private not-for-profit conservation or environmental organization. 32 The Etowah Initiative/Summer 1998 Activity calculation for the entire site and therefore Collier County has had only one major shift the density from one portion of the transfer in 15 years. Over 350 rights were same parcel to another without using the transferred in a single transaction from land TDR program. There has not been ad- owned by the Deltona Corporation to an- equate demand for increased density be- other site owned by it on Marco Island. cause developers in Collier County The developer subsequently donated the normally do not build to the density per- environmentally sensitive land to the mitted by the underlying. The approval county. One developer transferred 960 process reportedly deterred some develop- development credits from an estuarine area ers. Prior to the 1979 amendments, the to the upland portion of a site. A number of process involved a technically detailed such intrasite transfers have occurred, but application and required the review and the county does not include them in its approval of seven advisory boards and gov- TDR transaction count. ernmental agencies. Collier County is on the coast and Incentives to Use the TDR Program residents of coastal areas perceived little Requirements for landscaping, off- direct benefit from a program to preserve street parking, and open space are waived as interior lands. Moreover, there has been necessary to accommodate the additional some resistance from property owners in density. the designated receiving areas to the addi- tional density that transfers would impose. Education Efforts The county has been unable to overcome There have been minimal education the negative perception of the TDR pro- efforts. gram. Lack of sufficient staffing in the county planning office has prevented the county Buybacks from promoting the program to landowners Buybacks are not allowed; once the and developers who might use TDRs. development potential is severed, there can by no more development in the future. Sources Administrative Costs Interview with Barbara Cacchione, Collier Projected administrative costs are County Government, Community Devel- minimal. opment and Environmental Services Divi- sion, Planning Services, 2800 N. Horseshoe Litigation Drive, Naples, FL 33942. Phone (941) 403- 2300; Fax (941) 643-3266. There has been no litigation thus far. Roddewig, Richard J. and Cheryl A. Why has there been limited Inghram. Transferable Development Rights use of the program? Programs: TDRs and the Real Estate Mar- New construction in the overlay zone ketplace. Planning Advisory Service Re- is only regulated, not prohibited, so many port No. 401. Chicago: American Planning properties in the environmentally sensitive Association, 1987. area have been developed. In addition, there is an option to include unbuildable or envi- Siemon, Charles, Lee Worsham, and Bruce ronmentally sensitive areas in the density McLendon. Marketable, Transferable or Purchasable Development Rights. The Etowah Initiative/Summer 1998 33